So the lesson learned seems to be, if you have to insure your CFI, find a CFI you don't have to insure.

Sorry guys, I don't buy tools for A&P's, I don't buy gas for the gardener. Cover your cost of doing business and include it your rate. Very easy.

I'd love to send an invoice to a client that includes their share of my Errors and Omissions Policy. Heck, let me throw in my health insurance while I'm at it.

Do you have these people send you 1099's?

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Not quite the same. I can get insured on most any plane I’m willing to instruct in for no increase in policy rates. If I bought a separate policy to cover me then my hourly rate would go up by a factor of 5 just to cover the policy. Obviously my situation is not the same for every instructor but I’m definitely not unique.

If I bought a separate policy to cover me then my hourly rate would go up by a factor of 5 just to cover the policy.

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I am interested in how you arrive at the 5x figure. For a "normal" CFI instructing in normal light, piston GA aircraft, CFI insurance is nowhere near that expensive. Or are you instructing in higher value airplanes (or are looking for higher than standard coverage amounts)?

A quick look at Avemco's standard CFI rates for the lower 48 states shows that a combination of the highest limits they show on the table at https://avemco.com/cfinonowned/rates.aspx would be $1865/year (for $1M injury and property damage liability and $150,000 aircraft damage liability). If you, say, instructed 100 hours a year, that would be $18.65 an hour, which certainly can't be 5x your normal rate. Obviously lesser limits would be less expensive.

If you are indeed, say, a specialist in new-owner TBM training, or provide King Air recurrent training or something like that, then of course your rates would be higher, but that hasn't been the focus of the questions in this thread.

You either instruct in higher value airplanes, only instruct a few hours a year, charge virtually nothing for your services, or are highly exaggerating.

A quick look at Avemco's standard CFI rates for the lower 48 states shows that a combination of the highest limits they show on the table at https://avemco.com/cfinonowned/rates.aspx would be $1865/year (for $1M injury and property damage liability and $150,000 aircraft damage liability). If you, say, instructed 100 hours a year, that would be $18.65 an hour, which certainly can't be 5x your normal rate.

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Not very high value airplanes
Not very many hours
Buying me Lunch gets you a flight review
I’m not prone to exaggerating.....most of the time.

This. I had 0 time in the 414 when I started flying it, but I had around 1,000 hours in the 310, plus a few hundred or so in Navajos. Insurance figgered I knew enough. Ended up going to school (and made corrections on their material) but did the initial ferry flight before I went to school. Had 0 hours of dual in the aircraft itself, although now I need to do an IPC once/year.

Tell them what you and the CFI do have, and a lot of times they'll work with you.

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A student I trained in a 7AC champ bought a BC12D Taylorcraft, neither of us had any Taylorcraft time. The insurance initially wanted him to have 5 hours with an instructor with at least 5 hours of Taylorcraft time. We couldn't we find any instructors that had Taylorcraft time, so went back to the insurance company with my experience and they said that 5 hours with me would be fine. So I checked him out in the Taylorcraft.

Then he offered me the use of the Taylorcraft if I wanted to fly it, we checked again with the insurance to see what it would take to get me put on the insurance. They wanted me to get a 1 hour checkout with another instructor, even though I just spent 5+ hours checking out the owner in the airplane. Of course this would be with another instructor that had never flown a T-craft.

Either way, I have a hard time believing that even the FAA would consider an owner flying his airplane to maintenance as "compensation".

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No particularly good reason to tempt fate by allowing other owners to fly the airplane around at a discount, though. Well, actually the other owners can do it all they like, but I’d be paying the usual fare if it were me.

Of course I also have ratings that make me a target to make an example out of, if I’m doing it wrong. All it takes is one person with a bee in their bonnet for whatever reason.

Let’s see. Months of wondering what some bureaucracy is up to after a warning letter shows up in the mail, or just pay the tach time? I think I’d know what I would prefer.

No particularly good reason to tempt fate by allowing other owners to fly the airplane around at a discount, though. Well, actually the other owners can do it all they like, but I’d be paying the usual fare if it were me.

Of course I also have ratings that make me a target to make an example out of, if I’m doing it wrong. All it takes is one person with a bee in their bonnet for whatever reason.

Let’s see. Months of wondering what some bureaucracy is up to after a warning letter shows up in the mail, or just pay the tach time? I think I’d know what I would prefer.

Just following up. I added my CFI pal to the insurance. Before adding us, the insurance had two named pilots and the annual premium was a $822. After adding me and the CFI, the annual premium has risen to $1933. I am fairly confident that most, if not all, of the rise in premium was for adding me and not because of adding the CFI, although I did not ask about this specifically.